Changes from plenary report to adopted text

Removedii. the third and fourth subparagraphs are replaced by the following:;

Removed‘Notwithstanding Article 3, the reporting obligation shall not apply to derivative contracts within the same group where at least one of the counterparties is a non-financial counterparty that is not subject to the clearing obligation, or would be qualified as a non-financial counterparty not subject to the clearing obligation, if it were established in the Union, provided that:

Removed(a) both counterparties are included in the same consolidation on a full basis;

Removed(b) both counterparties are subject to appropriate centralised risk evaluation, measurement and control procedures; and

Removed(c) the parent undertaking is not a financial counterparty.

RemovedCounterparties shall notify their competent authorities of their intention to apply the exemption referred to in the third subparagraph. The exemption shall be valid unless the notified competent authorities do not agree upon the fulfilment of the conditions set out in the third subparagraph within three months of the date of notification.’

Removed(b) in paragraph 1a, fourth subparagraph,

Removed- point (a) is replaced by the following:

Removed“(a) that third country entity would be qualified as a financial counterparty if it were established in the Union; and”

Removed- point (b) is deleted.

Removed(ba) paragraph 1f is replaced by the following:

Removed“‘1f. Counterparties and CCPs that are subject to the reporting obligation referred to in paragraph 1 may delegate that reporting obligation. Where they do so, counterparties and CCPs remain fully responsible, and legally liable, for reporting the details of derivatives as well as for ensuring the correctness of the details reported.”;

Removed(bb) the following paragraphs are added:

Removed"6a. Where the data reported in accordance with Article 9 contain manifest errors or where financial or non-financial counterparties have not exercised due diligence when checking and reporting those data, ESMA shall, by decision, impose periodic penalty payments in order to compel that counterparty to put an end to its infringement.

RemovedThe periodic penalty payment shall be effective and proportionate, not exceeding a maximum 1% of the average daily turnover in the preceding business year.

RemovedBy ... [12 months from the date of entry into force of this amending Regulation] ESMA shall draft guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 further specifying the due diligence checks and procedures expected from financial and non-financial counterparties subject to the reporting obligation in accordance with Article 9 of this Regulation and the maximum penalties that can be imposed, which shall in any case not exceed the maximum laid down in the second subparagraph of this paragraph.

Removed6b. By … [24 months from the date of entry into force of this amending Regulation] ESMA shall submit a report to the Commission on whether the changes under Article 9(1) and paragraph 1 of this Article have resulted in a sufficiently clear improvement in the conduct of ESMA’s supervisory tasks and whether they have had an excessive negative impact on market participants. The report shall be accompanied by a cost-benefit analysis."

Removed(6) in Article 10, paragraphs 2a to 5 are replaced by the following:

Removed‘2a. The relevant competent authorities of the non-financial counterparty and of the other entities within the group shall establish cooperation procedures to ensure the effective calculation of the positions and evaluate and assess the level of exposure in OTC derivative contracts at the group level.

Removed3. In calculating the positions referred to in paragraph 1, the non-financial counterparty shall include all the OTC derivative contracts that are not cleared in a CCP authorised under Article 14 or recognised under Article 25 entered into by the non-financial counterparty which are not objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of the non-financial counterparty or of that group.

Removed4. ESMA shall develop draft regulatory technical standards, after having consulted the ESRB and other relevant authorities, specifying all of the following:

Removed(a) criteria for establishing which OTC derivative contracts are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity referred to in paragraph 3;

Removed(b) values of the clearing thresholds for uncleared derivatives, which are determined taking into account the systemic relevance of the sum of net positions and future net exposures per counterparty. ESMA shall also assess whether an aggregate activity threshold, taking into account the overall aggregate position in OTC derivatives of a financial counterparty, is necessary to ensure a prudent coverage of financial counterparties under the clearing obligation and set a level for such a threshold;

Removed(c) the mechanisms triggering a review of the values of the clearing thresholds following significant price fluctuations in the underlying class of OTC derivatives or a significant increase of financial stability risks.

RemovedESMA shall submit those draft regulatory technical standards to the Commission by … [PO: please insert the date =12 months from the date of entry into force of this Regulation].

RemovedPower is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

RemovedESMA shall review, in consultation with the ESRB, the clearing thresholds referred to in the first subparagraph, point (b), taking into account, in particular, the interconnectedness of financial counterparties. That review shall be conducted at least every 2 years, and earlier where necessary or where required under the mechanism established under the first subparagraph, point (c), and may propose changes to the thresholds as specified in the first subparagraph, point (b), by the regulatory technical standards adopted pursuant to this Article. When reviewing the clearing thresholds, ESMA shall consider whether the classes of OTC derivatives, for which a clearing threshold has been set, are still the relevant classes of OTC derivatives or if new classes should be introduced.

RemovedThat periodic review shall be accompanied by a report by ESMA on the subject.

Removed5. Each Member State shall designate an authority responsible for ensuring that the obligations of non-financial counterparties under this Regulation are met. That authority shall report to ESMA at least once a year, and more frequently where an emergency situation is identified under Article 24, on the activity in OTC derivatives of the non-financial counterparties it is responsible for as well as that of the group they belong to.

RemovedAt least every 2 years, ESMA shall present a report to the European Parliament, the Council and the Commission on the activities of Union non-financial counterparties in OTC derivatives, identifying areas where there is a lack of convergence and coherence in the application of this Regulation as well as potential risks to the financial stability of the Union.’;

Removed(7) Article 11 is amended as follows:

Removed(a) in paragraph 2, the following subparagraph is added:

Removed‘A non-financial counterparty becoming subject for the first time to the obligations laid down in the first subparagraph shall set up the necessary arrangements to comply with those obligations within four months following the notification referred to in Article 10(1), second subparagraph, point (a). A non-financial counterparty shall be exempted from those obligations for contracts entered into during the four months following that notification.’;

Removed(b) in paragraph 3, the following subparagraphs are added:

Removed‘Financial and non-financial counterparties shall notify EBA and their competent authorities about the models used for initial margin calculation with regard to risk management procedures laid down in the regulatory technical standards referred to in paragraph 15, point (a). Where EBA or the national competent authorities object, the counterparty is entitled to continue using the initial margin model for a period of up to one year following receipt of the objection. Where counterparties cease using such models, they shall notify EBA and their competent authorities thereof by the end of the quarter in which they ceased using the model.

RemovedFinancial counterparties shall report information on the risk-management procedures referred in the first subparagraph, including, where relevant, in relation to initial margin models used, to EBA and their competent authorities.

Removed‘A non-financial counterparty becoming subject for the first time to the obligations laid out in the first subparagraph shall set up the necessary arrangements to comply with those obligations within four months following the notification referred to in Article 10(1), second subparagraph, point (a). A non-financial counterparty shall be exempted from those obligations for contracts entered into during the four months following that notification.

Removed(ba) the following paragraph is inserted:

Removed“3a. Notwithstanding paragraph 3, single-stock options and equity index options not cleared by a CCP shall be temporarily exempted from risk-management procedures that require the timely, accurate and appropriately segregated exchange of collateral.

RemovedESMA shall monitor the impact of the exemption under the first subparagraph on financial stability, as well as regulatory developments in relation to the treatment of single-stock options and equity index options in non-EU jurisdictions, and shall, at least every two years, submit a report thereon to the Commission. After submission of the report by ESMA, the Commission shall assess whether international developments have led to more convergence in the treatment of single-stock options and equity index options and whether the temporary exemption of such options is still justified. The Commission may adopt a delegated act specifying that, after the expiry of an adaptation period, the exemption is to be removed. The adaptation period shall not exceed two years.

RemovedThe Commission is empowered to adopt the delegated act referred to in the second subparagraph of this paragraph in accordance with Article 82.”

Removed(bb) the following paragraph is inserted:

Removed‘12a. EBA shall set up a central validation function for industry-wide models used for the purpose of complying with the requirements set out in paragraph 3. In its role as central validator, EBA shall provide guidance on the general aspects of those models, such as their calibration, design, and instruments and assets class coverage.

RemovedEBA shall collect feedback from competent authorities, from ESMA and from EIOPA, and coordinate their views, and shall serve as a single point of discussion with the industry.

RemovedEBA shall also assist competent authorities in their approval processes regarding the general aspects of the implementation of those models. Competent authorities shall be solely responsible for validating the implementation of those models at the supervised entity level.

RemovedEBA shall charge a fee to counterparties using industry-wide models referred to in the first subparagraph. The fee shall be proportionate to the turnover of the counterparties concerned and shall cover all costs incurred by EBA for the performance of its tasks in accordance with the first subparagraph.’;

Removed▌

RemovedEBA may issue guidelines or recommendations with a view to ensure a uniform application of the risk-management procedures referred to in the first subparagraph, in accordance with the procedure laid down in Article 16 of Regulation (EU) No 1095/2010.

RemovedEBA shall develop drafts of those guidelines or recommendations in cooperation with the ESAs.’;

Removed(c) in paragraph 15, first subparagraph is amended as follows:

Removedi. point (aa) is replaced by the following:.

Removed‘(aa) the supervisory procedures, to ensure initial and ongoing validation of the risk-management procedures referred to in paragraph 3, applied by the largest credit institutions authorised in accordance with Directive 2013/36/EU and the largest investment firms authorised in accordance with Directive 2014/65/EU as defined under paragraph 15(a);’

Removedii. the following point is inserted:

Removed‘(ab) the data standards, formats and type of information to be reported and disclosed on risk-management procedures, including where relevant on initial margin models, in accordance with the supervisory requirements referred to in point (aa);

Removediii. the following subparagraph is inserted after point (c):

Removed‘In specifying the scope of application of the obligation under point (aa) of the first subparagraph, EBA shall ensure that only those counterparties that are particularly active in uncleared OTC derivatives are subject to initial and ongoing validation of the risk management procedures referred to in that paragraph.’’

Removed(8) Article 13 is replaced by the following:

Removed‘Article 13

RemovedMechanism to avoid duplicative or conflicting rules

Removed1. The Commission shall be assisted by the ESAs in monitoring the international application of the principles laid down in Article 11, in particular with regard to potential duplicative or conflicting requirements on market participants, and recommend possible action.